Mark Karpeles, president of Mt. Gox bitcoin exchange, speaks during a new conference in Tokyo on Feb. 28. / Jiji Press, AFP/Getty Images

by Donna Leinwand Leger, USA TODAY

by Donna Leinwand Leger, USA TODAY

Mt. Gox, the Tokyo-based Bitcoin exchange that collapsed earlier this year after $425 million worth of its customers' digital currency disappeared, lost its bid to reorganize and will likely be liquidated, a Japanese bankruptcy court administrator said in a notice Wednesday.

The court will also investigate Mt. Gox CEO Mark Karpeles' liability in the collapse of the business, attorney Nobuaki Kobayashi, the court-appointed administrator, said Wednesday in a notice posted on the Bitcoin exchange's website.

Karpeles on Feb. 28 asked a Tokyo bankruptcy court for protection from its creditors while it restructured and reorganized.

Mt. Gox claimed in February that the digital wallets that stored the Bitcoin had been hacked and 850,000 Bitcoin were lost. The company later said it discovered 200,000 Bitcoin in an unused wallet, reducing the lost Bitcoin to 650,000.

A week later, Flexcoin, another Bitcoin exchange, shut down, claiming hackers "robbed" the company of all 896 of its bitcoins valued at $600,000.

The court dismissed Mt. Gox's rehabilitation application Wednesday as too "difficult for the company to carry out," Kobayashi said.

Karpeles "has lost his authority to administer the company's assets," the attorney said.

Once the bankruptcy proceedings begin, court administrators and other experts will examine the company's assets, investigate the disappearance of the Bitcoin and distribute the company's remaining assets among its creditors, the attorney said.

"I will strive to fairly and equitably administer the company's assets," Kobayashi wrote in the notice. He said he would work with the U.S. bankruptcy court, where the company has also filed for relief. A creditors' meeting has not yet been set, he said.

Although the court has not entered its final bankruptcy ruling, Kobayashi said once the bankruptcy proceedings start, "it will be unlikely that the company can restart the exchange."

Karpeles, in a note posted Wednesday on the Mt. Gox website, said the company had "no prospects for the restart of the business."

The dismissal of the company's application for rehabilitation "created great inconvenience and concerns to our creditors, for which we apologize," the note said.